Beige Book

Beige Book: Economic Conditions Improved Since Q1 2014

Local Markets Return to ‘Normal’

BY: KRISTA FRANKS BROCK

More than 35 percent of the more than 350 metro markets tracked in the National Association of Home Builders’ and First American’s Leading Markets Index are performing at 90 percent or higher of their pre-housing crisis norms, according to the latest Leading Markets Index.

Previously, NAHB and First American tracked markets based on their rate of growth in the Improving Markets Index. Instead, the Leading Markets Index compares each market to its pre-crisis norms in terms of current permits, prices, and employment.

Currently, 56 markets have turned the corner and returned to normal, up from 54 last month.

“More markets are slowly returning to normal levels and we expect this upward trend to continue as an improving economy and pent-up demand brings more home buyers back into the marketplace,” said Rick Judson, chairman of the NAHB.

A majority of the markets that are back to normal levels are smaller markets with populations of less than 500,000. Forty-eight of the 56 markets that are back to normal fall into this category, with many benefitting from strong energy sectors, which lead to strong employment.

Overall, metro markets across the nation are performing at an average of 86 percent of normal levels in terms of permits, prices, and employment, according to NAHB. Forty-five percent of metros are exceeding this rate.

Among large metros, Baton Rouge, Louisiana, in performing best, 42 percent better than its pre-crisis level. Oklahoma City, Oklahoma, Austin Texas, and Houston, Texas, are also at the top of the list of major metros.

Among smaller metros, two are performing at twice their pre-crisis level—Odessa, Texas, and Midland, Texas.

As markets continue to work their way back to normal and/or surpass their previous norms, Judson says, “Policymakers must be careful to avoid actions that would harm consumer confidence and impede the ongoing recovery.”

 

Foreclosure Inventory Shrinks 21% from Year Ago

http://www.dsnews.com

BY: ESTHER CHO

While still at an elevated level, foreclosure inventory is fading and has fallen for 15 straight months as of January 2013, CoreLogic reported Thursday.

According to the data provider’s foreclosure inventory report, the number of homes in some stage of the foreclosure process is now down to 1.2 million as of January. Year-over-year, foreclosure inventory has fallen 21 percent from 1.5 million. Month-over-month, foreclosure inventory shrunk by 3.3 percent. At the same time, foreclosure inventory accounted for 2.3 percent of all homes with a mortgage, down from 3.5 percent in January 2012.

“The backlog of distressed assets continues to fade as the foreclosure inventory has fallen to a level not seen since mid-2009,” said Mark Fleming, chief economist for CoreLogic.

Anand Nallathambi, president and CEO of CoreLogic, added, “We still have over a million homes in some stage of foreclosure which is too high, but the continuing downward trend in completed foreclosures is a very positive signal that there is a light at the end of the tunnel.”

The number of homes lost to the foreclosure process also declined from a year ago, but increased on a monthly basis. In January 2013, completed foreclosures numbered 61,000, down from 75,000 in January 2012, but up 10.5 percent from 56,000 in December 2012. CoreLogic explained the monthly uptick has occurred each January for the past 13 years, most likely due to banks holding off on foreclosures during the holiday.

Before the housing market decline in 2007, CoreLogic data shows completed foreclosures averaged 21,000 per month between 2000 and 2006. As of September 2008, CoreLogic reported 4.2 million homes have been lost to foreclosure.

Across the nation, six states and 13 out of the 100 largest metro areas saw an increase in their foreclosure rate year-over-year, according to CoreLogic.

The state with the highest foreclosure inventory was Florida, which has a rate of 10 percent compared to the national average of 2.9 percent. New Jersey’s foreclosure inventory rate of 7.2 percent put it at second, with New York (5.1 percent), Nevada (4.7 percent), and Illinois (4.6 percent) filling the next three spots in the top five.

CoreLogic also ranked the top five states for completed foreclosures over a one-year period ending January 2013. California led with 96,000 completed forclosures and was followed by Florida (95,000), Michigan (74,000), Texas (59,000), and Georgia (50,000).The five states account for almost half of all completed foreclosures.

13 Things That Will Cost More in 2013

Written by Matthew Granite, WTSP-TV

TAMPA, FL — Before we get to the bad, there is some good. Some of the best deals we’ve seen since Black Friday are expected to drop overnight. For now, here is a list of things that will likely cost more in 2013.

#1 Airfare
As if it wasn’t already expensive enough! More changes and practices from the airline industry will bring price increases for the year ahead. Want a hot meal on a long-distance flight? You could soon be paying extra for that. On top of the increases we’ve already saw last year, airfare analyst and CEO of FareCompare.com, Rick Seaney, ticket prices will increase around 7%.

Although it has not officially been announced, many insiders expect increases to baggage fees, as well as onboard options and seat selection.

#2 Digital Cameras

You can blame the smartphone and smaller tablets equipped with cameras.

Fewer people are buying consumer-grade digital cameras, which means manufacturers are producing fewer cameras, leading to fewer discounts. In 2011, I was able to flag quality higher-end 14 MP cameras for $40 during the holidays. In 2012, the exact same cameras sold for $60 during the same sales period. Prices only go up from here. Expect a $20 to $30 price increase per unit.

#3 Steaks & Hamburgers

Enjoy those Omaha Steaks deals the second they drop! According to the most recent forecast from the U.S. Department of Agriculture, higher meat prices are due to an intense drought that plagued almost all farmlands across the U.S. this past year. This caused corn and other animal feed ingredients to skyrocket, passing the price increase along to consumers. Expect a price increase of around 4% per cut.

#4 Beer

Copper prices are on the rise, as part of a 2013 price increase flagged by freelance writer/consumer reporter Laura Heller. According to Heller, “it’s copper’s time to shine.” That’s due to a move by the SEC to approve a fund to trade the metal. The fund could lead to the diminished availability of the metal in the U.S., affecting equipment for brewing beer and distilling liquor.

#5 Smartphones

The push to get higher megapixel cameras into devices like smartphones and the ripple effect of a recent decision by T-Mobile will dramatically affect prices throughout the industry. Later this year, T-Mobile will push no-contract cell phone plans, but charge consumers full prices for their phones. This elimination of the mobile phone subsidy is being observed very closely by competing companies and analysts suggest this is a game-changer for us all. On something like a new iPhone that can be purchased for $199 when it’s released on a two-year contract, customers would pay $600 instead. Even if installment plans are available, this is a major change for the average customer to wrap his or her head around.

#6 Desktops

You can blame portable computing. In 2010, I received close to 200requests for desktop computers from Ways 2 Save viewers. In 2011, I received about half that number. Last year, I received a whopping 15 deal requests for desktops. The diminished demand is being felt even moreso by the companies that produce desktops. This year, fewer models will be produced from fewer companies, resulting in higher costs. Expect to pay $50 to $100 more per desktop.

#7 Laptops

In the same way desktops are affected by portable computers, laptops are influenced by hyper-portable, powerful tablets. Try and find someone who didn’t have an iPad Mini on their wish list this past Christmas! With the Microsoft Surface now on the market offering Microsoft Office applications in an extremely sleek and portable presence, laptop demand will further drop this year. With less laptop competition, expect to pay up to $80 more per unit on mid-end laptop configurations.

#8 Shipping Costs

I noticed it when Amazon.com started launching categories of “add-on only” items. Despite the fact I already pay $79 per year for Amazon Prime (which also gets me the Amazon Video streaming service), items that I’d regularly be entitled to with free two-day shipping, now cannot be shipped unless a minimum order total is met. This is just a single example of price increases directly attributed to UPS and FedEX. Both shipping giants are increasing prices by up to 4.9% for 2013.

#9 TVs

Stream, stream, stream! The increased demand for streaming services has manufacturers like LG and Samsung scrambling to build Wi-Fi and Netflix/Hulu/Vudu-ready televisions. With the majority of the older LCD television stock depleted over the course of 2012, the current LED technology commands a higher price. Based on the sales numbers I’ve seen, consumers can expect to pay around $60 more per mid-end to high-end LED television.

#10 Cable Television

The number of people dumping their cable providers for services like Hulu and abandoning settop boxes for Roku and Apple TV will result in higher rates. As cable companies jump to cover their operating costs with fewer customers, rates are expected to increase, although this will vary by region and provider. Initially, package increase costs are not expecting to be more than $5 on average per customer.

#11 Satellite TV

The two biggest players in the satellite world, Direct TV and Dish Network, have significant rate hikes planned this year. In 10 days, some DISH customers will have their rates raised by as much as $15. DirecTV customers will see increases of around 5% across the board. You can blame the increase in programming costs affecting service providers.

#12 Cars

Every year, we see modest car price increases across the board, but this year, certain manufacturers are increasing prices by almost $1,400. CNN Money flagged the base price for a 2013 Lexus CT 200h up $3,000 this year and the 2013 Hyundai Elantra Sedan at $1,350 more. The nice thing about base price increases is that local dealerships always respond with better promotions and on the whole, I expect you to get more for your money when it comes to features this coming year.

#13 Tuition

It probably shouldn’t surprise you to see tuition increases this year, as that’s the case every year, but DealNews.com has paid particular attention to state school tuition increase, which weren’t initially on my radar. According to their research, which they pulled from the College Board Advocacy & Policy Center, public 4-year colleges will increase tuition by 4.8% on average with an increase of 3.7% in fees. The almost 9% collective increase will affect students and their families across the country.

Exciting News for 2013 Real Estate

• Housing Inventory – Inventory levels will continue to decline in 2013. As the economy improves and interest rates hold at record low levels, buyer demand increases. The surge in buyer activity and investor demand is forcing inventory numbers down to record low levels. This demand will force construction to increase in 2013 due to this strong demand.
• House prices – House prices will increase dramatically in 2013 in part due to shortages in inventory. Other factors that will add to the increase in house prices include high demand from investors buying single family homes to hold as long term rentals, a decline in foreclosures and short sales and an increase in buyer demand. The median expected house prices should rise 4% nationally while the State of Washington should rise 5 – 8%. Some high-demand markets and high-demand home styles could increase as high as 15 – 20% (this increase is largely due to inventory issues).
• New Home Sales – New home sales continue to trend higher as demand increases. The lack of new home inventory over the past 6 years has created a new interest in new homes. New home sales were up 27% from the fall of 2011 to the fall of 2012 while inventory is almost at a 50 year low. I anticipate that in 2013 we will see our highest sales rate of new homes in history. This means that new home inventory will be absorbed by the market quicker than any other time on record.

Here is good news for all of you who have had buyers who have had a difficult time getting a loan:

• FICO Scores – FICO scores for closed loans have increased substantially meaning that it became even harder to get loans (even FHA loans) in 2011 and 2012. FICO scores on closed loans will reduce in 2013 due in part to easing up of lending which will result in another surge of buying in 2013. In 2013 FICO scores on closed loans will average below 700.

2013 is shaping up to be an amazing year for real estate and I want you all to get ready. If you live in areas where spring is the busy time, spend the next couple of weeks getting those buyer and seller packages ready, get your pending to close checklists prepared and spend some hours of power mapping out your plan. If you live in an area typically known as a haven for snowbirds, you may already be in the thick of it. I am very excited for what 2013 will bring!

 

Completed Foreclosures Down 18% from Year Ago: CoreLogic

http://www.DSNEWS.com

BY: ESTHER CHO

Fewer homes were added to foreclosure inventory in November as short sales become a more common tool to prevent foreclosure, according to a recent CoreLogicreport.

Data from CoreLogic revealed 55,000 homes were lost to foreclosure in November. The figure represents an 18 percent decrease from November 2011 and a 6 percent decrease from October’s upwardly revised 59,000.

“The pace of completed foreclosures has significantly improved over a year ago as short sales gain popularity as a disposition method,” said Mark Fleming, chief economist for CoreLogic, in a release. “Additionally, the inventory of foreclosed properties continues to decline while the housing market demonstrates an ongoing ability to absorb the distressed sales that result from completed foreclosures.”

Although foreclosure inventory is shrinking, the number of completed foreclosures is still high compared to pre-crises levels.

Before the housing market decline in 2007, CoreLogic noted completed foreclosures averaged 21,000 per month between 2000 and 2006. Since September 2008, about 4 million homes have been lost to foreclosure, according to CoreLogic.

The states that saw the highest number of completed foreclosures in a one-year period ending in November 2012 were California (102,000), Florida (94,000), Michigan (75,000), Texas (58,000) and Georgia (52,000). The five states alone account for half of all completed foreclosures.

The state with the highest foreclosure inventory rate as a percentage was Florida, which led with a rate of 10.4 percent. New Jersey’s foreclosure inventory rate of 7.3 percent gave it the second highest ranking. Other states in the top five were New York (5.1 percent), Nevada (4.7 percent), and Illinois (4.7 percent).

Two metros with notably high foreclosure inventory rates were found in Florida. Tampa had a rate of 10.9 percent and Orlando a rate of 10.5 percent.

Other metros with a high percentage of inventory in foreclosure included Nassau-Suffolk, New York (6.7 percent); Edison-New Brunswick, New Jersey (6.1 percent); New York (5.6 percent); and Chicago (5.6 percent).

Yearly Price Gains Continue into Offseason for Homebuying

http://www.dsnews.com

BY: ESTHER CHO

Compared to 2011, home prices continued to show strong gains in October and posted their biggest yearly increase since June 2006, according to data from CoreLogic.

Home prices—including distressed sale—climbed 6.3 percent higher year-over-year in October, marking the eighth consecutive month of yearly gains. Distressed sales include transactions for REOs and short sales.

With the conclusion of the home-buying season, home prices dropped by 0.2 percent from September to October.

According to the data provider’s pending home price index, prices should further increase yearly by 7.1 percent in November when including distressed sales.

As expected during the winter season, prices should fall monthly and are projected to decrease by 0.3 percent from October to November. CoreLogic’s pending index is based on Multiple Listing Service data.

“The housing recovery that started earlier in 2012 continues to gain momentum,” said Mark Fleming, chief economist for CoreLogic, in a release. “The recovery is geographically broad-based with almost all markets experiencing some appreciation.”

CoreLogic found only five states experienced yearly price decreases.

“Sand and energy states continue to experience the most robust appreciation and some judicial foreclosure states are even recording increasing prices,” Fleming added.

The states with the biggest year-over-year price gains when including distressed sales were Arizona (+21.3 percent), Hawaii (+13.2 percent), Idaho (+12.4 percent), Nevada (+12.4 percent) and North Dakota (+10.4 percent).

Among the five states where prices depreciated year-over-year, Illinois and Delaware tied with the biggest losses, each seeing price declines of 2.7 percent. Rhode Island and New Jersey also tied with 0.6 percent decreases. Alabama ranked fifth and posted a 0.3 percent decline.

Out of the largest metros, Phoenix held a significant lead with a 24.5 percent yearly gain. Riverside ranked second for its 7.3 percent increase and was followed by Houston (+6.6 percent), Los Angeles (+6.4 percent), and Dallas (+4.5 percent).

Increase in Asking Prices Exceeds Rent in Certain Markets

http://www.dsnews.com

BY: ESTHER CHO

National gains for rentals still grew faster than asking prices for homes in November, but in certain metros, the trend was reversed, Trulia reported Tuesday.

According to data from Trulia, rent prices in November increased by 5.6 percent year-over-year, while asking prices for homes were up 3.8 percent, representing the biggest increase so far this year.

Even though rents stayed ahead with bigger improvements, asking prices in 14 of the 25 largest rental markets managed to post greater increases compared to rents, the data provider revealed.

Denver, for example, experienced a 9 percent yearly increase for rent prices, the fourth highest out of other large metros. However, asking prices for homes in Denver rose even higher at 12.4 percent. San Francisco also posted a significant gain in rents at 5.8 percent, but asking prices rose by 9.5 percent year-over-year.

In Seattle, asking prices were slightly ahead at 8.8 percent compared to 8.3 percent for rent prices.

Rents in Houston rose the fastest year-over-year in November, posting a 16.8 percent increase. Other metros that led with significant yearly gains in rent included Oakland (11.6 percent), Miami (10.8 percent), and Philadelphia (8.9 percent).

Although recent reports have revealed typical seasonal monthly declines month-over-month for home prices, Trulia found asking prices rose monthly by 0.8 percent. According to Trulia, asking prices on for-sale homes lead sales prices by several months.

On a quarterly basis, asking prices were up 2.2 percent, with three metros posting significant quarterly gains in asking prices for the first time since the start of the housing crises, Trulia reported. The three metros were Atlanta (+6.2 percent), Riverside-San Bernardino (5.5 percent), and Sacramento (5.3 percent).

According to Trulia chief economist Jed Kolko, “price recovery is strongest in the largest metros,” while “price gains are starting to waver in smaller markets.”

Out of the 100 largest metros, 70 saw quarterly gains for asking prices, and 76 experienced yearly growth.

“The key factors behind today’s price gains are job growth, falling vacancies, and–above all–rebounding from the huge price declines of the housing bust,” Kolko explained.

Data for asking home prices and rents is based on listings found on Trulia.com.

 

Rising Prices Could Lift 3.5M Homeowners Out of Negative Equity

http://www.dsnews.com

BY: KRISTA FRANKS BROCK

While almost one-quarter of homeowners remain underwater, rising home prices over the past year have some economists hopeful negative equity could begin to diminish in coming months.

“The negative equity problem is still crippling many homeowners and the wider economy,” Capital Economicsstated in a report.

In addition to the almost one-fourth of homeowners who owe more on their mortgage loans than their homes are worth, almost half of homeowners do not meet the 80 percent loan-to-value ratio required for a standard refinancing.

While “[a]dmittedly, the recovery is still in its infancy,” Capital Economics sees the potential for 3.5 million homeowners to move out of negative equity positions over the next 12 months.

CoreLogic reports prices have risen 5 percent over the past 12 months, and Capital Economics reports the greatest movement is occurring in the same locations that experienced the greatest price declines and highest instances of foreclosures and negative equity during the housing crisis.

For example, about 40 percent of homeowners in Arizona and Florida are underwater. However, home prices have risen 18.7 percent and 6.3 percent, respectively, in these two states over the past year.

While Capital Economics is sticking to its prediction that house prices will rise about 5 percent next year, the economists admit “the upside risks to that forecast are clearly rising.”

So far this year, rising home prices have helped 1.3 million households rise out of negative equity, according to CoreLogic.

If home prices were to rise by 10 percent next year, about 3.5 million borrowers would be lifted out of negative equity and 6 million would become eligible for standard refinancing after seeing their loan-to-value ratios fall back to or below 80 percent.

“The faster prices rebound, the quicker the negative equity problem will be resolved,” Capital Economics stated.

With home prices still about 27 percent below their 2006 peak, 10 percent under-valued compared to current rental rates, and 20 percent under-valued compared to per capita incomes, Capital Economics sees no need for concern over another bubble as prices continue to rise.

Economists Far More Optimistic on Future of Housing Prices: Survey

http://www.dsnews.com

BY: TORY BARRINGER

A strengthening housing market in the past few months has economists making more bullish predictions about the recovery, Zillow revealed Thursday.

The company released the results of its most recent Home Price Expectations Survey, showing that economists surveyed expect home prices to rise by a total of 2.3 percent during 2012. This change in sentiment is a major turnaround from June, when respondents predicted home prices would experience a net decline this year.

Predictions were varied, but respondents seemed to agree on a positive trend: The most optimistic quartile of panelists predicted a 4.4 percent increase in 2012 prices, while the most pessimistic panel predicted an average increase of 0.3 percent.

Economists surveyed also revised their forecasts for 2013-2016, predicting steady price growth in each year.

“This is further evidence that we’re seeing a true recovery in the housing market,” said Dr. Stan Humphries, chief economist for Zillow. “Not since mid-2010 – in the midst of the homebuyer tax credits – have we seen this group so bullish on housing. It’s refreshing to see this optimism at a time when the market seems to be making an organic recovery, in the absence of an artificial stimulant like the tax credits.”

In addition, the survey showed that more than half of respondents want to eliminate the mortgage interest tax deduction, with 50 percent saying it should be phased out gradually and 10 percent wanting it cut as soon as possible. Thirty percent said the deduction should have more eligibility restrictions placed on it, while 11 percent believe it should remain as-is.

“Although the mortgage interest deduction remains enormously popular with existing and aspiring homeowners, it costs the federal government about $90 billion a year,” said Terry Loebs, founder of PulsenomicsLLC, the company that conducted the survey for Zillow.

“Time will tell whether the unprecedented fiscal challenges facing the U.S., coupled with a housing market now on the mend, will embolden more policymakers to touch this lightning rod,” Loebs continued.

The survey panel also gave input on government policies and the election. When asked about the use of eminent domain to seize selected underwater (but current) mortgages, an overwhelming 91 percent said they oppose the idea. Some county governments are evaluating such a proposal, and the fight has even gone to Capitol Hill.

As far as November’s presidential election goes, Mitt Romney has more support from those surveyed, with 45 percent saying they will vote for him over President Obama’s 34 percent. Regardless of who they would vote for, 47 percent of respondents said they believe Obama would promote more significant housing policy changes, while 32 percent said they don’t think there would be any real difference with either candidate.